ODAC Newsletter - Jan 21

Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.

BP increased its exposure to the 'wild east' this week through a new joint venture with the state-owned Russian oil giant Rosneft. Given the rocky history of its existing joint venture, TNK-BP, the deal illustrates the risks BP has been forced to take to gain access to meaningful oil resources. It may also suggest a conscious decision to shift away from the US in the wake of the Deepwater Horizon disaster. News that the new partners will be drilling in the Kara Sea in the Arctic was met with dismay by environmental groups, and Energy Secretary Chris Huhne was criticised for cheerleading the deal, in light of Russia's treatment of Mikhail Khodorkovsky, who languishes in a Siberian gaol cell. His company Yukos was dismembered by the state in 2004 and Rosneft got the assets.

The pressure to develop all available resources was underlined in BP's Energy Outlook 2030 published this week, which forecast global primary energy demand will grow by almost 40% in the next 20 years. Unsurprisingly given BP's long-standing rejection of peak oil, the analysis foresees no shortages, but does predict a more powerful role for OPEC as its market share increases; a demand-led move away from oil towards natural gas; and blistering growth in biofuels — where the company has committed more money than most, by the way. An FT columnist summed up, "ignore anyone predicting a global energy squeeze in the next two decades." Famous last words.

The most hyped alternative to oil currently is shale gas. Following its success in the US, the fuel is being promoted as a game changer because of the size of the resource and its claimed emissions reduction potential. A report from the Tyndall Centre, timed to coincide with the release of the Gaslands documentary this week, recommends a precautionary approach to the introduction of fracking in the UK because of the risk of water pollution, its potential to increase total emissions, and to distract investment from truly low-carbon technologies. Important questions also remain on how much shale gas can economically be extracted and whether the low gas prices produced by the US shale boom will depress investment elsewhere [see - The Shale Gas Revolution: Hype & Reality].

With the supply side of the energy equation being pushed into increasingly uncertain and risky territory it was good to see a plan unveiled this week aimed at reducing energy demand. Tradable Energy Quotas: A Policy Framework for Peak Oil and Climate Change is the latest iteration of an idea which the previous government described as "ahead of its time". With this launch the authors have addressed issues raised by an earlier audit of the scheme which questioned the cost-benefit analysis. Of course the policy would be politically difficult, but it would help redress the inherent unfairness of fuel price rises to the poor, and help connect people's behaviour to energy and climate goals, so it certainly deserves further investigation.

- Primary energy use is set to grow by nearly 40pc over the next 20 years, with 93pc of this growth expected from non-OECD countries such as China. Overall energy demand from non-OECD countries is set to rapidly increase from the current level of just over half, to two-thirds.

- Non fossil fuels, such as nuclear, hydro and renewables are together expected to provide the biggest source of growth for the first time. Renewable energy over the next 20 years including solar, wind, and geothermal are projected to grow from 5pc to 18pc...

World oil prices remained close to the $100-per-barrel mark last night as BP said Opec was set to increase its share of global oil production to levels not seen since the oil shocks of the 1970s.

In the BP Energy Outlook 2030, the oil giant predicted that the producers' cartel would see its share rise to 46 per cent during the coming two decades — "a position not seen since 1977", just years after an Opec embargo triggered the oil crisis in 1973...

The International Energy Agency (IEA) said on Tuesday that OPEC leader Saudi Arabia had stealthily boosted output to cool an oil price rally, while OPEC accused the agency of providing inconsistent oil price views.

Tensions between oil exporter group OPEC and the agency, representing industrialised consumers, have risen as Western countries put pressure on the Saudis and their allies, the only producing nations with spare capacity, to meet unexpectedly robust demand that has driven crude up near $100 a barrel...

In the last week, the three official forecasters of the supply and demand for oil, the IEA in Paris, the EIA in Washington, and the OPEC Secretariat in Vienna, released new forecasts of what they believe will happen to global oil prices and the availability during the next two years. As everybody should know by now, this may be a critical time for global oil production which is hardly growing at all; and consumption in some parts of the world has been increasing rapidly.

Of late, interest has centered on demand for oil with some scattered concerns about how much spare capacity OPEC really has. With global supply close to stagnant, very little growth is expected in the global oil supply in the next two years with the possible exception of the Saudis turning on what spare capacity they have ready to go...

Oil rose in New York, paring its third weekly decline in four, as speculation demand will recover countered concern over rising stockpiles in the U.S., the world's biggest crude consumer.

Futures for March delivery traded near $90 a barrel as investors bought back contracts after prices dropped the most in two months yesterday. U.S. crude inventories ended six weeks of declines as refiners cut operating rates by the most since October 2009, the Energy Department reported yesterday...

Royal Dutch Shell Plc, Europe's largest oil company, said it shut down production from four Brent platforms in the North Sea following an accident.

"All non-essential personnel onboard the Shell-operated Brent Bravo platform in the northern North Sea returned to shore on Saturday," Sally Hepton, a London-based company spokeswoman, said by phone today. "We have taken these actions as a precautionary measure."...

Brazilian oil deposits below a layer of salt in the Atlantic Ocean hold at least 123 billion barrels of reserves, more than double government estimates, according to a university study by a former Petroleo Brasileiro SA geologist.

The research, which set out to show government figures were too optimistic, found they underestimated the area's potential, said Hernani Chaves, a professor at the Rio de Janeiro State University who worked at Petrobras for 35 years. The forecast, which the study puts at a 90 percent probability, compares with the Brazilian oil regulator's 50 billion-barrel estimate...

Gas

Ministers are being urged to halt controversial projects to drill for shale gas over fears that it poses significant risks to public health and the environment.

A new report prepared for the Co-op warns that the full impact of drilling for shale gas — an energy resource that has sparked a frenzy of exploration in the US — should be assessed before the go-ahead is given projects in the UK...

Quebec should hold off on shale gas drilling until serious environmental, economic and legal questions about the industry can be answered, a panel of U.S. and Quebec experts told a packed public meeting in Mont St. Hilaire Saturday.

"The government of Quebec should look to Pennsylvania, and monitor how it is dealing with its problems with shale gas," said Robert Howarth, a professor of ecology and environmental biology at Cornell University who has studied the environmental impacts of the shale gas industry in the U.S...

For nearly a decade, the Nabucco pipeline has existed only on a map — a dotted line that would connect oceans of Central Asian and Middle Eastern gas to a European market that is otherwise reliant on Russia...

Coal

Devastating floods in Australia's Queensland state have slashed production of steelmaking coal by 30 percent in the resources-rich region, the world's biggest miner BHP Billiton said Thursday.

But while the weather put the brakes on its coal production, the Anglo-Australian mining giant managed record iron ore output in the December quarter as demand for minerals boomed following the global financial crisis...

Renewables

Germany's fifth-biggest solar power park emerges as a smudge on the horizon long before you reach it on the outskirts of the small, sleepy village of Eberswalde, an hour's drive north of Berlin. "In the far distance, you can see it," Peter Kobbe says, pointing through heavy December snowfall as he steers his Citroen van along an icy road.

Kobbe, 64, works at Finow airport, where a local investment firm built the 58 million euro ($77 million) solar park in 2009. Finow itself was built by the Nazis before World War Two and later became one of the Soviet Union's main Cold War hubs. Now the small aircraft that still use the airport share it with about 90,000 solar modules -- which together generate enough to power 6,400 households a year...

By mass, 99.9% of the Earth is hotter than 100C. That means that not far below our feet is the power to boil unlimited water and generate clean, renewable energy. Is the UK throwing all it can at this extraordinary opportunity? Of course not, who do you think we are? Germans?

That contrasts strikingly with the more glamorous sister of deep geothermal energy, nuclear power. Both ultimately tap the heat generated by the decay of radioactive elements. Geothermal plants send water down holes to bring to the surface the heat from natural radioactive decay deep in the mantle. Nuclear power mines the radionucleides, concentrates them, sends them critical and then wonders what to do with the leftover mess - not very elegant by comparison...

UK

Fuel rationing may be needed by 2020 in the U.K. to meet the government's carbon emission targets, a panel of lawmakers said, suggesting an electronic trading system for energy quotas.

Under the system, called Tradable Energy Quotas, or TEQs, energy credits would be distributed free to every adult, who could then buy and sell surplus units, the London-based research group The Lean Economy Connection said today in a report commissioned by the All Party Parliamentary Group on Peak Oil. The multi-party panel of lawmakers looks at the impacts of declining fossil-fuel production...

English local authorities will be able to seek funding for cycle routes, better pedestrian facilities and other environmentally friendly transport schemes from a £560m fund to be announced on Wednesday...

Climate

ExxonMobil, the world's largest oil company, expects global carbon emissions to rise by nearly 25% in the next 20 years, in effect dismissing hopes that runaway climate change can be arrested and massive loss of life prevented.

According to the company's annual Outlook for Energy report — due to be published in the next few weeks — demand for power will increase by nearly 40% in the next 20 years, lifting emissions by around 0.9% a year at least until 2030...

Barack Obama ordered a broad review of environmental, health and safety regulations today to try to pre-empt Republican charges that he is leading an anti-business administration.

In an executive order, the US president instructed government agencies to ensure all regulations are cost-effective, science-based and transparent, as well as promoting economic growth, innovation and job creation...

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